Africa’s rising debt burden is eroding funding for sustainable development in least developed countries (LDCs), impacting heavily on health and education, according to Oyebanke Abejirin, the Economic Affairs Officer at the Macroeconomics, Finance and Governance Division of the Economic Commission for Africa.
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Making a presentation on the opportunities and challenges for Africa’s Least Developed countries (LDCs), at the second session on the committee on economic governance in Addis Ababa, Ethiopia, on November 17, Abejirin explained that high debt servicing costs reduce capacity for SDG related spending causing a real decline in health and education funding across many countries.
She noted that debt distress worsens the public financial positions of African LDCs. Debt servicing reached a record 11.6% of exports in 2022.
In 2021, she said, African governments allocated 4.8% of GDPs to debt servicing compared to 2.6% for health and 4.8% for education.
"Social protection systems in Africa LDCs are severely inadequate; only 12-13% of population is covered,” she added and stressed that Inclusive, robust social protection "is essential to shield the LDCs from global and regional shocks including post Covid-19 effects and climate change related disasters.”
Abejirin highlighted that there is a need to strengthen domestic revenue generation to help close the gap in financing the SDGs in Africa. According to her, African LDCs make up 33 of the 45 LDCs contributing to less than 1% of the global GDP despite having 10% of the global population.
She emphasized the need for Africa to have a public debt sustainability framework that includes linking debt obligations to productive investment, improving fiscal and debt transparency and developing a framework for responsible borrowing.
Sharing the Mozambique perspective on debt servicing, Pamela Mabanda, an official from the Ministry of Finance, said the country is experiencing a trade balance deficit, importing more than exporting with imports mainly consisting of intermediate and capital goods. The sustainability of the economy, she said, is threatened by the high proportion of expenditure (almost 70%) going towards debt repayment, which limits resources for investment and support.
"There is a need to improve domestic resource mobilization and reduce tax evasion, especially for the main imports in the country,” Mabanda noted, emphasising the importance of fiscal consolidation to reduce expenditure and increase revenues through diversification of financial funds and a proactive approach to macro fiscal risk.
Ronald Mangani, the Chief Executive Officer Press Corporation in Malawi, pointed out a perceived contradiction in the desire for as much aid as possible and the need for a clear understanding of what exactly is desired from development assistance so as to reconcile the various positions on these issues.
Allan Mukungu, the Economic Affairs Officer at ECA, discussed the inability of African countries to finance their needs due to fiscal deficits with an average public debt of 67% in 2024.
"Nine African countries are in debt distress and 11 are at high risk, making them vulnerable to financing issues,” he said.
"The focus should be on creating fiscal space to finance sustainable development and meet the Agenda 2063 aspiration.”
Mukungu pointed out the importance of the integrated national financing framework (INFFs) for financing SDGs.
"INFFs helps to unlock financing for national development priorities by aligning available financing with the national development plans.